eib financing of energy efficient...
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EIB Financing of Energy Efficient LightingElisabetta Cucchi
Policy OfficerInstitutional Strategy Department
Brussels 10 December 2013
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The European Investment Bank (EIB)Long-term finance promoting European objectives
Economic and Social Cohesion and Convergence
Implementation of the Knowledge Economy
Development of Trans-European Networks (TENs)
Support for Small and Medium Enterprises (SMEs)
Environmental sustainability
Supporting Sustainable, Competitive and Secure Energy
EIB was created by the Treaty of Rome in 1958
EIB is a not-for-profit, policy driven institution
EIB is 100% owned by the 28 EU Member States
EIB signed loans amounting to EUR 52bn in 2012 (90% in EU)
EIB uses its special expertise and resources to make a difference to the future of Europe and its partners by supporting sound investments which further EU policy goals
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EIB support to Energy Efficiency
EIB lending to energy efficiency averaging EUR 1.3bn/year since 2008Focus on buildings (50%), energy (30%) and industry (15%)Recent EIB Energy Review prioritises “no regrets” sectors : energy efficiency, renewable energy, networks and RDI
EUR bn
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EIB Financing Facilities
EIB provides two main facilities:
Direct Loans
Large-scale projects (more than EUR 25m)
Intermediated Loans
Small and medium-scale projects (particularly to SMEs) via national
and regional intermediary banks
Lending decision remains with the financial intermediary
Joint Financial and non-Financial Instruments
In addition to its traditional lending activity, EIB is complementing its action towards the development of the EE financing market in the EU with a number of initiatives in cooperation with the European Commission, notably:
EEEF: European Energy Efficiency Fund
JESSICA: Joint-European Support for Sustainable Investments in City Areas.
ELENA: European Local Energy Assistance
EPEC: European PPPs Expertise Centre
DEEP Green: Debt for Energy Efficiency Projects Green platform (under discussion)
RSFF: Risk-Sharing Finance Facility
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Focus on Lighting
Lighting usually financed as part of broader investment programmes
SSL/LED is one EE technology choice
Issue of high initial cost vs. long-term savings
One option for this could be Energy Performance Contracting / use of
ESCO business model
LED lighting in buildings could be one of the technology choices by the
ESCOs
European Energy Efficiency Fund (EEEF)
EUR 265M (EUR 125M EERP, EUR 75M EIB, EUR 60M CDP and EUR 5M DB)
• Managed by Deutsche Bank (www.eeef.eu)
• 70% of the investment shall be targeted towards Energy Efficiency
• Beneficiaries: Local & regional Public authorities, but PPPs are possible.
• Financing in form of loans, guarantees, forfeiting schemes (to finance ESCO
projects)…
• Technical assistance (grant) is available to structure projects (EUR 20M).
• Results to date: 6 projects (EUR 79M) + 8 TA operations (EUR 6.3M) approved
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JESSICA at a glance
Joint European Support for Sustainable Invest. in City AreasObjective: invest Structural Funds in a revolving way to urban projects, including EE
• Initiative of the EC (DG REGIO) launched in 2006 together with EIB and CEB to establish a common approach for financing urban development and strengthening the urban dimensionin cohesion policy through repayable assistance
• Investments in sustainable urban transformation (brownfields/city regeneration, renewable energy, energy efficiency, clusters’ development, transport, tourism/public service infrastructure)
Overall JESSICA objectives
• To increase Structural Funds’efficiency and productivity
• To increase leverage
• To exploit new partnerships and synergies
Use of innovative financial instruments allowing for the reutilization of resources invested in the urban sector
Mobilize public/private resources for investments in projects being part of an integrated urban development schemeUse of managerial, financial and implementation competencies of the private sector and IFIs such as EIB
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URBAN DEVELOPMENT FUNDURBAN DEVELOPMENT FUND
EUROPEAN COMMISSIONStructural Funds
EUROPEAN COMMISSIONStructural Funds
MEMBER STATEVia a designated Managing Authority
MEMBER STATEVia a designated Managing Authority
Holding FundHolding Fund
Projects forming part of an Integrated Plan for Sustainable Urban Development
optional
OTHER INVESTORS(Public & Private)
OTHER INVESTORS(Public & Private)
IFIs/Public Agencies/ Banks
IFIs/Public Agencies/ Banks
Investment (equity, loan or guarantee)
CITIESCITIES
JESSICA structure
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18 JESSICA HFscurrently operating in 10 Member StatesEUR 1.8bn in commitments
Holding Funds (HFs)
42 agreements signed to dateEUR 1.5bn committed to UDFs
Urban Development Funds (UDFs)
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12
1
3
5
1
1
1
57
3
72
2
5
62
1JESSICA HF in the Member States
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18
JESSICA UDFs in the Member States
2 JESSICA Technical Assistance / Fund and Structuring Services1
JESSICA state of play
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JESSICA: focus on energy / EE
Possible types of JESSICA energy projects:
Renewable Energy• Solar, biomass, wind
Clean Transport• Electric vehicles, including automobiles,
motorcycles and bicycles • Fleet management (improvement of
energy efficiency)
Energy Efficiency, Co-generation and Energy Management
• Renovation or extension of existing district heating or cooling networks; high-efficiency combined heat and power
• Energy savings/energy efficiency in buildings
JESSICA track-record in EE to date:
Out of the 18 Holding Funds (EUR1.8bn) with EIB as HF Manager/ ~ 35% potentially allocated to EE related Urban Projects:•Lithuania, EUR 227M HF: EE in housing•London, EUR 48M UDF: EE and small scale RE in public buildings•Italy, EUR 86M UDF: EE and small scale RE and transport projects•Spain, EUR128M HF: National HF for EE/RE
•EE projects may also be financed through as part of urban regeneration investments in “traditional” UDFs (e.g. Portugal, Bulgaria, Scotland, Poland)
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Background: Replacing street lighting in the city of Ponferrada to improve energy efficiency, in accordance with the national Energy Efficiency and Savings Plan 2011-2020
Best practice because…Significant reduction in
energy consumption and in CO2 emissions
Introduction of new technology
Cost savings of approx. EUR 1 mil. in the first year
alone
Market gapCurrent solution:
inefficient, expensive to maintain, high light
pollutionLong-term project – 12y
Preferential interest rate –50% JESSICA contribution
JESSICA project example:Public Lightning Replacement in Ponferrada (Spain)
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ELENA - ESCO Project Development
Supporting cities:• City of Paris• Greater London Authority (RE:FIT, DEPDU)• Villa Nova de Gaia• City of Ljubljana• BristolSupporting provinces and small municipalities:• Province of Barcelona • Province of Milan • Province of Modena • Province of Chieti• Province of Padova• Region of Murcia• Lisbon Region
The European PPP Expertise Centre (EPEC) is a unique cooperative initiative of the EIB, the EC as well as EU Candidates and MS.
Specific activities in
EPEC and Energy Efficiency
EE Mandate:To raise the awareness of local, regional and national authorities in the areas of
energy efficiency and renewable energy improvements in housing and other types of buildings
Goes beyond EPEC’s usual focus on PPPs
Materials: guidance and factsheets
•EE in buildings•Street-lighting•Cohesion Policy•ESCOs and EPC•Information on financing for EE
Knowledge-sharing
•Dedicated website•www.eib.org/epec/ee•Case-study database•Contacts database •Stakeholder cooperation
Events
•Workshops•Roundtables•Seminars•Conferences
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DEEP Green
Banks Compartment
DEEP Green Initiative
Utilities Compartment
ESCOs Compartment
Public sector Compartment
• Debt for Energy Efficiency Projects Green Platform (DEEP GREEN Platform).
• Structured in four different lines of products (“compartments”) to cover the diverse financing needs of the key players involved in the EE market.
• Targets aggregation and de-risking of EE projects, key barriers to the financing of the EE market
• Aim at increasing financing availability for EE projects by further developing EIB and commercial bank lending activity to EE
• Focus on 1st compartment as a first step
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Direct Lending Indirect Lending / Financing
EU
Corporate / Project FinancingSenior Loans (pari passu)Subordinated Debt
Financial Intermediaries(extend lending capacity)
Risk SharingCo-financing
1 2
Aaa Aa A (Baa3) Ba B
RSFF[up to EUR 10bn
assumingleverage of 5.0x ]
Risk Sharing Finance Facility (RSFF)
RSFF Value Added Proposition
Competitive terms and pricing
Long Maturities of up to 10 years
Large single loan sizes (< EUR 300m)
Strong technology/industry expertise
No cross selling / Take and hold strategy
Signaling Effect: EIB as quality stamp
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RDI in Manufacturing – What can be financed?
R&DR&D programmes (typically over 3
to 4 years);
Eligible costs R&D Opex, such as personnel
costs, contract research, consumables, overheads; R&D Capex, such as facilities,
equipment, acquisition of tangible & intangible assets, if a prerequisite.
InnovationCapital expenditure related to the
first commercial launch Deployment of KETs
Eligible costsPrototypes & pilot plants; First of a kind production lines, Application of advanced
manufacturing systems, Deployment of advanced and
efficient processes.
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RSFF Vision for MFF 2014-2020How do the new initiatives fit into the EIB Group product offering?
EIB Global Loans
EUR 7.5m EUR 25m EUR 300m
RSI: Innovative SMEsCIP: SMEs
Hig
h
R
ISK
Low
EUR 25K
EIB/EIF MCI
EIB Investment Loans/Guarantees
EIB RSFFIndividual RDI Loans
Fund of Funds Focus: SMEs (40% Buy-Out)Av. Ticket Size: EUR 1.8m
RSFF GFIDirect (Co-)InvestmentsPure RDI Invest. Focus
Mid-Caps onlyAv. Ticket Size: EUR 15m
SIZE OF SINGLE TRANSACTION
Fund
ing
Pre-seedSeed Funding
Start-up / Mezzanine/Growth Commercialization / Industrialization Growth / StabilityPhas
es
1st Valley of Death
2nd Valley of Death
EIF
Fund
of F
unds
A
ppro
ach
Deb
t PF
Gua
rant
ees
EIB
RS
FF (E
C)
EIB
Ow
n C
apita
l
Lege
nd:
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LED lighting in buildings could be one of the technology choices by the
ESCOs
EIB financing is available for larger and smaller projects including via
specialized funds (i.e. EEE-F)
Technical Assistance is available to develop large scale ESCO
programmes (ELENA)
Currently ELENA supports ESCO project development in excess of
EUR 500 million potential investment opportunities
Further advice via EPEC on street lighting and EE PPP structures
EIB support to RDI and manufacturing is also available
Summary